By Rodney Ndamba
Achieving early signs of economic confidence post the Covid-19 pandemic is the greatest attainment any country wishes for.
Many countries will have to prove their economic resilience beyond reasonable doubt.
The pandemic tested many economies, with some being left vulnerable.
African countries still offer the greatest opportunities for investment post the pandemic provided they use this period to build their competitiveness by addressing inherent issues such as weak institutions, corruption, uncompetitive fiscal regimes, conflicts, banks mistrust, debts fatigue, unsustainable business practices, poor economic and business models.
To attract sustainable global investors, a country has to prove a strong business culture, good corporate and economic governance which can be trusted by its own nationals first.
In this case, building a shared national vision on the economy becomes fundamental.
It is important to acknowledge that Zimbabwe has started receiving sentiments of economic confidence, which need to be capitalised on.
However, these emerging sentiments could be spoiled if economic governance is not strengthened with strong and legitimate reforms.
This article provides a critical perspective on inherent issues that could spoil economic confidence at the moment.
The issue of policy inconsistency has been an impeding sentiment, which has resulted in the country missing many opportunities.
The National Development Strategy 1 (NDS1) presents opportunities for addressing past economic legacies of policy inconsistence and misapplication.
The strategy document needs to be applied fully and consistently to build trust.
It is important to acknowledge that this has been the first time where a national strategy is translated into local languages to build shared understanding.
A better understanding of policies allows citizens to play a meaningful contributory role in their achievement.
While the country has been using statutory instruments to bridge policy implementation, it is vital for the application and implementation by various economic institutions to be done consistently with certainty.
What investors look for in a country is predictability despite whatever policies that may be implemented.
It is no secret that the country needs to convince the world on economic governance reforms.
However, such reforms cannot be achieved by government alone, but all citizens playing their role and responsibility.
In this case, government and its citizens need to be partners for economic development, not competing forces.
Consequently, good economic policies without strong economic governance institutions will result in no change.
As such, for NDS1 to achieve the intended results, government needs to restructure and strengthen its economic governance institutions and gain societal support.
Corporate governance remains one of Zimbabwe’s biggest inherent enemies to economic confidence.
What investors see in local companies determines whether they should invest in those existing companies or set up fresh companies.
How companies are directed and controlled tells a lot about the economy.
Despite the National Code of Corporate Governance in Zimbabwe (Zimcode) being launched in 2015, there is very little evidence to show that companies are applying it.
Evidence has shown that many companies continue to lack balance of skills and gender equity.
In many cases, many company boards are characterised by directors with the same professional qualifications.
Some investors see this as risky because collusion has a high chance of occurring in such companies.
Responsible investors tend to prefer boards with diverse skills and composition.
Evidence in Zimbabwe has shown that companies with economic, environmental, social and governance skills profiles and diversity tend to be resilient and perform better over a long period.
Research has shown that there is a strong correlation between corporate governance and economic confidence.
In Africa, countries like South Africa, Mauritius, Botswana and Rwanda with strong corporate governance values have experienced economic confidence, hence attracting the bulk of foreign direct investment (FDI) into Africa.
Despite Zimbabwe recently enacting the Companies and Other Business Entities Act (24:31) which also annexes the National Code on Corporate Governance (Section 220), it is critical that these instruments are implemented and monitored for compliance to show the world that the country can follow its own statutes. Investors worry of investing in countries with weak corporate governance practices.
The extent to which companies behave and conduct their business tells a great story to foreign investors about the country.
For example, speculative tendencies and poor corporate governance can give an indication that investor money will not be safe in some companies.
According to Corporate Knights (2021), Africa had one company featuring in the top 100 Sustainable Companies in the World which was Standard Bank South Africa.
This gives an indication that investors may struggle to find sustainable companies that strongly and legitimately embed economic, environmental, social and governance values in their operations.
As such, there is need for a paradigm shift to sustainable business values to entice sustainable investors to Zimbabwe.
To manage corporate behaviours, there is need to strengthen business and economic regulatory institutions.
Consequently, the highly informalised nature of economic activities in the country impairs investor confidence.
Research has also shown international investors preferring countries where most business activities are registered under some form of law.
In developed economies, all commercial, entrepreneurship and start-up activities have to be registered by law and be operating a bank account.
In Zimbabwe, the Companies and Other Business Entities Act (24:31) has full scope for all start-up and entrepreneurs to be registered under the Private Business Corporations Act.
However, this Act has been the least applied.
Banking sector confidence
Investors bring money into the country. As such, the first priority is to get assurance that their money will be safe in any bank they will prefer.
The legacy of failed banks in Zimbabwe still haunts many people.
For those who lost their savings, they will never forget this. It is no secret that trust in our financial institutions remains impaired.
To bring that confidence, strong reforms in the banking sector governance in Zimbabwe are crucial.
However, once trust has been lost it’s always hard to regain. It is vital that there is strong local trust in our financial institutions by locals first before foreign investors.
While the Reserve Bank of Zimbabwe is trying hard to start shaking up the financial systems, full overhaul of banking sector regulation will be a defining factor for gaining confidence and trust.
Regulations alone are not enough but implementation and adherence.
Finally, while the emerging international sentiments of economic confidence may be good, it is important that domestically we are confident of the success we make no matter how small it may be.
The much-celebrated success in Rwanda did not just start big, but small through a national shared vision which was accompanied by legitimate actions.
Public support for our national economy and NDS1 is key to uphold the emerging ray of economic confidence sentiments being expressed.
Zimbabwe has great potential provided we start believing in ourselves.
Lastly, we must urgently deal decisively with all forms of corruption, poor corporate governance and a culture of inefficiency.
Rodney Ndamba is the chief executive/founder of the Institute for Sustainability Africa, an independent think-tank and research institute ‘advancing sustainability initiatives for Africa’.
These weekly Insights articles are coordinated by Lovemore Kadenge, independent consultant, past president of the Zimbabwe Economics Society and past president of the Institute of Chartered Secretaries & Administrators in Zimbabwe. Email: firstname.lastname@example.org and mobile No. +263 772 382 852